Private Loans for Those With Poor Credit

• April 28, 2022

It can be tough, if not impossible, to a get a loan from a traditional financial institution when you have bad credit. Banks require an applicant to undergo a credit check before approving a loan, and anyone with a credit score of less than 670 will be rejected. Lenders prefer to work with borrowers who have a proven track record when it comes to paying their bills on time, as they are considered low-risk. A credit score over 740 is ideal for a bank, and a score of over 670 is typically considered mandatory. This, therefore, excludes any candidate with a poor to average credit score. This particularly affects young adults, typically under the age of 30, who may not have an ideal credit record, or any record at all. Luckily, those affected by bad or non-existing credit have an option at their disposal: borrowing from a private lender. Private lenders will not discriminate against those with less-than-ideal credit histories, and can offer a number of benefits that banks simply cannot. Let’s explore the benefits of securing a private loan below.

Benefits of private loans

More forgiving qualification standards

Unlike banks, a private lender will not subject the applicant to stringent financial standards. They will not be forced to undergo a credit check that would disqualify them from a bank loan, nor will they be required to produce an endless amount of documents, proving their financial viability. Instead, a private lender will ask an applicant to provide just a few simple proofs of viability.

First, the applicant will be asked to prove that they are of legal age. In this case, adequate proofs include one’s passport, driver’s license, and/or Medicare card.

Secondly, the applicant will need to provide proof of steady income. This consists of documents from one’s employer, or employers, demonstrating a constant stream of adequate income over a meaningful period of time.

Next, the applicant will be required to provide proof of Canadian residency. This can easily be accomplished by providing one’s passport and/or birth certificate.

Finally, the applicant must provide their contact information, including their telephone number, address, and a bank account where the funds can be transferred.

Unlike relying on a bank for a loan, the process of obtaining one from a private lender is quick and efficient. A private lender will not discriminate against a candidate based on their credit score, source of income, age, or brief citizenship status.

This makes the prospect of a private loan particularly attractive to young adults. Those under a certain age may not have had the privilege of building a strong credit rating yet. Or perhaps they suffered from a brief financial crisis that impacted their credit score, and have not had the time to adequately improve it yet. Perhaps these very same people now have the means of paying back a loan in a timely manner, but cannot secure the funds in the first place, due to their existing credit rating.

Similarly, banks may unfairly deny a new immigrant a loan, in part because they have not had the opportunity to build a strong credit rating in Canada yet, or to improve a compromised credit score.

Private lenders eliminate this discouraging roadblock and offer those with credit issues, an opportunity to secure a loan and realize their financial goals.

Flexibility

Banks operate according to conventional and regulated standards, and do not offer much flexibility when it comes to loans. Private lenders, on the other hand, are not subject to any regulations in Canada, and can set their own terms. Variables such as loan fees and interest rates, among others, are negotiable, allowing the borrower to choose terms that best suit them. This level of flexibility makes borrowing from a private lender highly attractive.

Control

Since the terms of a private loan depend entirely on the borrower, they are offered a considerable amount of freedom and control. Every decision the borrower makes regarding these terms, is entirely their decision, preventing them from having to compromise. The lender is free to decide how much interest to charge, and the borrower is free to negotiate the terms of the loan. The collaborative nature of a private loan can therefore lead to a better relationship between lender and borrower.

Efficiency

By securing their loan from a private lender, a borrower will ensure that the funds are transferred into their account quickly. In some cases, one can receive their funds, just a few hours after the loan is approved. Those hard-pressed to receive their money quickly, simply need to schedule an appraisal immediately, and have the few required proofs ready by the follow-up date.

Possibility of improved credit

Taking a loan from a private lender can actually allow a borrower to improve their credit score. This is, of course, especially advantageous to those with either a poor credit score, or no credit record whatsoever. By offering such a borrower a loan, a private lender is allowing them to improve their credit rating, by paying back the loan in a timely manner. Having a good credit history will allow the borrower to obtain a future loan more easily.

Conclusion

Traditional financial institutions, like banks, operate according to convention. Before approving a loan, an applicant will be forced to provide a staggering amount of documentation, proving income status, among other factors. The candidate will also be subject to a credit check, which will immediately disqualify them if their credit is less than optimal, or non-existing. Fortunately for such candidates, they have another means of securing a loan: through a private lender. If you have struggled to obtain a loan due to a credit-related issue, please contact us immediately to schedule an appraisal.